The Only Thing New

The apologists for the Fed keep coming out of the financial woodwork, usually telling us how good a job they've done, rescuing the globe and all of its unappreciative, benighted lessors from the financial precipice of economic hell.

Another one, Ruchir Sharma, global strategist at Morgan Stanley Investment Management, displayed his computer keyboard skills with "The Dollar--the Fed--Still Rule"--in the Wall Street Journal. The article begins with what is apparently one of the Journal's editorial page requirements, the usual screed against Donal Trump.

To many readers this article would appear to about The Fed. It isn't. This is about Trump, his followers and anyone contemplating voting for him and their backward ways and inward  turning views that are spreading around the globe. As you might expect, according to this apologist, it's happening at the wrong time. Which should leave you with a fair question: When is the right time, sir? We think we know the answer to that.

What follows is a weak defense of the Fed's incompetence and a not so subtle plea for expanding their mandates. They have screwed up the main two things they claimed they were responsible for, employment and inflation, and now because the interconnectedness of the globe they need to expand their mandate.

"The Fed has been forced to recognize it can no longer focus on America alone," Sharma writes.  He then notes in early 2015 the Fed officially announced for the first time it was considering "international development" into it decisions. The financial crisis began in 2008. This is a real prescient group of non-elected bureaucrats.

"Though Mr. Trump argues that America must tend to its own affairs because it is weak, the Fed's evolving role shows the limits of this argument."  Sharma sets up his straw man with this next line. "The U.S. may have slipped as an economic superpower, falling to 23% of global GDP from 60% in 1960. But as a financial superpower Washington has never been more influential. Forecasts of the dollar's downfall have completely missed the mark."

He shrewdly covers a lot of ground there. So let's break it down piece by piece. On the contrary, the evolving Fed role proves Trump's view. The Federal Reserve is a powerful institution being used to spread U.S. hegemony via the political and military industrial complex at the expense of its citizenry. Another globalist tip is "Washington has never been more influential."  In some corners that would labeled a blatant lie. We will be nice and just call it deceptive. Apparently, Mr. Sharma hasn't been following this administration's foreign policy record very close.

Forecasts about the dollar's lack of weakness is a backhanded shot at gold. It's an attempt to reassure and keep whatever confidence is left in the fiat money world from further decay. Without their printing presses central bankers are nothing more than a group of overpaid bureaucratic eunuchs, cautiously probing their way around on their hand and knees for their dropped set of keys when the power suddenly went out.

"The Fed is caught in a trap," he says. "Every time the U.S. economy starts to perk up, the Fed signals it's intent to start to return interest rates to normal. But the signal sends shock waves through a heavily indebted global economy and back to American shores. (We wonder how long he struggled to come up with that "back to American shores" phrase.) So the Fed delays rate increases as it did in June and again this week."

To begin with, nobody--not the Fed, this author or us--knows what and where normal interest rates are. Only the market can determine normal interest rates. And that won't happen and can't happen because a bunch of bureaucrats, mostly who've never had real jobs, can't fathom the unfathomable. He mentions heavy global indebtedness but fails to suggest who and what caused it. Some how the term politicians isn't mentioned. We were probably asleep at the outhouse, but we'll ask the question anyway: How many times has the U.S. economy started to perk up in the last decade?

The real truth is this gentleman is a globalist, maybe even a neocon, like his editorial friends at the Journal. The Fed is part of the problem. The status quo crowd are trembling weekends in their under ground getaway caves and never is the only good time for the change that is badly needed, the change in part Trump represents but most probably won't achieve if elected.

The only thing new and it isn't new. But we all know history tells us what that is. Like the words of an old song slightly rearranged: The only thing different, the only thing new, he's got your picture and I'm stuck here with you. For now.

Overnight

The WSJ reported that "The Bank of Japan announced an extra dose of monetary stimulus Friday, joining fresh efforts by Prime Minister Shinzo Abe to reboot the economy.

The central bank said it would buy ¥6 trillion worth of exchange-traded funds annually, up from ¥3.3 trillion previously, in an attempt to stoke inflation and economic growth. It said it would leave its asset-purchase target at ¥80 trillion a year.
 
The monetary policy board voted approved the expansion of ETF purchases by a vote of 7-2.
The BOJ left unchanged its purchases of Japanese government bonds, which comprise the bulk of its asset buying, underscoring concerns about whether the program would be sustainable if JGB buying were expanded. It already owns more than a third of all outstanding JGBs, with its balance sheet ballooning to 85% of gross domestic product as of May.

The central bank also left a key interest rate on bank reserves unchanged at minus 0.1%. It dropped the rate into negative territory in February to drive yields lower and spur lending and investment, but the move delivered limited results while provoking a backlash from banks and the Japanese public."

As Asian shares hit a one-year high overnight and the yen touch a two-week high as they waited for the BOJ's announcement, but as reported: Japan shares whipsawed and the yen surged after the Bank of Japan threw markets a smaller-than-expected bone in keenly watched decision on Friday. While the BOJ eased its monetary policy further by increasing its buying of exchange-traded funds (ETFs), it didn't change interest rates or increase the monetary base. 
 
Reuters reported the BOJ will increase its ETF buying so that its holdings rise at an annual pace of 6 trillion yen, compared with 3.3 trillion yen previously. The BOJ left its base money target unchanged, said Reuters. The Japanese yen surged against the dollar after the announcement, with the dollar/yen pair falling as low as 102.85, compared with around 103.75 immediately before the decision. The yen was already volatile before the announcement, touching a session high of 105.33.

 The Nikkei 225 traded between gains and losses after the decision, tumbling as much as 1.66 percent immediately after the announcement, before quickly retracing all of its losses to trade up 0.16 percent.On  other markets, Australia, South Korea and China traded mostly flat after the BOJ announcement while Hong Kong's Hang Seng index was down 0.82 percent. Owing to concerns  about oversupply, oil prices fell to three-month lows, with U.S. benchmark now down more than 20 percent from this year's peak.

Overnight

It's about what the Bank of Japan does this Friday from many Asian investors as the Nikkei 225 traded down early Thursday after a strong yen and the fact Wall Street also traded lower whch didn't lend much support.

Caution is the name of the game until Friday when the BOJ ends its two day meeting with what many investors hope is a more than expected monetary policy.the Nikkei was off a little over 1% at 16,488.74. The Shanghai Composite was mixed trading between positive and negative; the Kopsi fell 0.4%, Hang Send 0.4% while the Australian ASX 200 rallied 0.4%.

One source reported:
Gold traded steady early on Thursday, clinging to gains from the previous session when it rose 1.5 percent to a 2-week high on a weaker dollar after the U.S. Federal Reserve left interest rates unchanged. Spot gold was little changed at $1,338.87 an ounce at 0112 GMT. Bullion on Wednesday touched a high of $1,342.18, its best since July 14. U.S. gold rose 0.9 percent to $1,338.7 an ounce. The Federal Reserve, always the hairsplitters, left interest rates unchanged on Wednesday while noting near-term risks to the U.S. economic outlook had diminished.

 The Fed came under fire Wednesday after leaving rates unchanged as was widely expected.
A former advisor to the Dallas Fed, told CNBC's "Power Lunch" there have been many, many opportunities to hike rates. Now its labor markets conditions index, which gauges the health of the job market, has been negative six months running, she said. "[Chair Janet Yellen] doesn't know what to do. They don't know what to do," Booth said. 

"They're scared stiff right now," she added, noting oil prices and the possibility of inverting the yield curve are probably concerns. David Kelly, chief global strategist for JPMorgan Funds, agrees the Fed should have hiked rates a long time ago. 
 
"They've never found the perfect moment, but you never get perfection in life. I think they've made a big mistake by not moving sooner," he told "Power Lunch." This is much of what we've been saying for some time now.

Is This The Face Of A Hate Crime Criminal?

 
We've said for a while now the problem isn't deflation facing the central banks, particularly the Fed, it's the possibility of slow growth coupled with rising inflation, otherwise known as stagflation.

Despite the Fed's famous search for that magical 2% inflation barometer, the Fed has it's sneaky way of keeping real inflation indicators out of the gauges it uses to track inflation. And this is not new. For those of you who have no recall of that kind of scenario, stagflation, it's one where precious metals   usually do well. Your purchasing power doesn't. Now stagflation doesn't happen very often. In most cases somebody has to really screw up to cause.

Consumers have been blamed for many things since this last economic meltdown, most recently their failure to spend to help revive growth. This is a Keynesian canard that people think worked in the 1930s and that it will work again.These are indeed contentious, to use a soft word, times with few signs of any abatement in sight. Yet consumers have enormous power by exercising their collective purse strings. They can refuse to purchase anything but essentials. They can reject the coming cashless society. The can demand no further watering down of their purchasing power by monetary authorities.

If you are one of the ones unfortunately existing on fixed or retirement income these zero and negative interest rates ladled out are not only contemptuous they have decimated your purchasing power. These incompetents at the Eccles Building chose to bail out their Wall Street friends and leave you and yours twisting in the wind. These actions are all part and parcel of the in-crowd, the establishment. 

Make no mistake. There are no racial, religious or party barriers here whether you are brown, yellow, black or white. They couldn't care less. They only pretend to care. Look around. You'll see this is a global problem. The ruling elites know exactly what they want. And they count on you to continue not knowing what you want. More of the same is as far away from having a better life than you and I are from becoming the queen or king of the United Kingdom. We understand the Queen's jewel collection is quite stunning, however.

Without villains there's no need for heroes. What the in-crowd is best at is creating villains, what use to be called divide and conquer. Who they are dividing and conquering is you and me. And if you're dumb enough to play their silly polling game every four years, we'll all get what we deserve, divided and conquered. What the world needs now is not more love, it's a global political enema. The same old faces with with  the same old receding hairlines, the same old pancake make-up, the same old lies.

You have to give it to them. Their cunning, their packaging, their success, we just keep buying and swallowing it. Either that or we're pretty dumb. Mitch Stewart, the elitist Hillary strategist, called Trump supporters "stupid white people."  Does that mean, Mr. Stewart, in your estimation, the black people who support your Caucasian candidate are stupid Oreo Cookies? This is the divide and conquer rhetoric they want you to fall for. You're better than that. The real truth is it's the Mitch Stewarts, white, black, brown or yellow, on both sides of the aisle, who see you that way, not for what you really are, decent, hardworking people trying to live your life out in your own best way without interfering or harming anyone.

We read somewhere else he was quoted as saying he hated stupid white people in general. Now we're not attorneys but that sounds like discrimination and hate speech. He is singling out a large segment of the population that happen to be members of a particular race for supposedly trying to exercise their freedom of choice when it comes to voting. His rhetoric seems to carry a hateful glare to it. Is this a hate crime.?  There just could be some enterprising lawyer or two who want to file the case.. When ignorant people kept all those African Americans from voting in the South for all those years, they were afraid of two things--a difference of opinion and a possible changing of the guard.

Meanwhile, we have a message for Mr. Stewart and his fellow travelers. We're white, not necessarily Trump people and we might be stupid. But we don't think so. One thing is certain, sir, we're here and we have no plans to move.  You, sir, can try to put whatever elitist spin on that you want. We'll still be here.

Now for that stagflation scenario, here is another sign, the weakness of  durable goods orders.




zerohedge.com/news/2016-07-27/durable-goods-orders-crash-most-2-years-longest-non-recessionary-streak-declines-us-

Overnight

Despite the Nikkei 225 rebounding 1.3% overnight Wednesday from its Tuesday losses, it's still a wait and see game for many Asian investors until Friday to find out how much if any stimulus package the Bank of Japan will announce. Rumors floated around the market today it would be something like six trillion yen or $57 billion in direct fiscal outlays over the next few years, a local newspaper reported. Though less than the 10 trillion expected, the hope for some kind central bank easing policy from the BOJ's two day meeting that ends Friday still exists.

In other markets the Kospi was flat at 2,026.93; the hang Send edged 0.3% higher; the Australian ASX 200 was off 0.1% after being up in earlier trading; the Shanghai composite and Shenzhen both surrendered small losses. The yen traded at 105.12 against the dollar after Tuesday's close of 104.64.

What happens in Japan is critical in the eyes of many not only because the nation's been in a long economic funk but there are continuing signs global growth remains weak and just last month the OECD projected slower growth as a sign all the monetary policy moves might not help and could even make the slowdown worse.

Hardly Alone

The dilemma the Fed faces--besides just being genuinely incompetent and the horrible ramifications that can have on ordinary peoples' lives--is they raise rates and growth remains slow.

Part of their reason for raising rates anyway is to give the impression they will have some breathing room should Katy have to try to bar the door. Millions of American lives center on pension returns either now or in the immediate future. And public pensions like those in California, Illinois and New York are huge with huge obligations and in many case huge deficits.

The Fed's excessive monetary stimulation policies proves once most things can bite two ways. According to the Wall Street Journal, "Pension Returns to Hit New Lows," "Connecticut now allocates 10% of its budget to pay down unfunded pension liabilities that more than doubled over the past decade."  To be sure, there are other causes for this turmoil, mostly politicians who in good times kick pension funding obligations down the road in the name of their favorite giveaways, but that decade also coincides with Fed policies.

One thing we know if things go down the drain, politicians will deny the blame. And that leaves those bureaucrats. Chicago, the city Carl Sandburg once described as "hog for butcher of the world...City of Big Shoulders," has enough problems to make a preacher cry. A homicide rate that gets manipulated more often the Fed jobs data, a growing exodus out of town and, yes, a "$20 billion pension hole" giving its fund a junk rating.

And there's more. A lot of people once they retire move away from where they spent their working careers. States and municipalities take a dim view of that for the most part, showing their attitude you made it here you should spend some of it here as more seek to tax these contributions. These pension liabilities are another way to spell bubble. And bubbles are becoming so frequent  today, so many of them, they're difficult to keep track of.

Now politicians, bureaucrats and academics will no doubt destroy reams of paper, recycled or otherwise, debating and defining what's a bubble. An obligation coming due  seldom meets their criterion. The common lie these so-called fiduciaries tell is short term volatility matters little. It's the long term that counts as these people have a fondness for relying on the future to bail them out.

But as the Journal notes there's been a drop in 20-year annualized returns, those same numbers insurance and annuity firms used to love to quote before the 2008-09 crisis. Long term expectations and performances have suffered from two recessions and abnormally low interest rates over the last  15 years. All three of  these entities--pension funds, insurance and annuity sellers--depend on steady long term returns to meet their needs.

Two California funds, the largest in the U.S. By assets, managing a combined $484 billion for 2.6 million public employees and retirees, saw their 20-year returns target fall below 7.5% to 7.3% for one and 7.1% for the other. Taxpayer or workers are usually on the political hook for funding any shortcomings, the Journal notes. But here's the real rub according to the Center dot Retirement Research at Boston College: "Every one percentage drop in investment returns represents an increase of 12% in liabilities."

So if you think social security is a landmine waiting to be detonated, it's hardly alone.

We Like Charts Too

We like charts as well as the next person. Here's one the implications of which, if they hold true, a lot of investors might not like so much however. We came across it at davidstockmanscontracorner.com/chart-of-the-day-crash-warning-household-net-worthdpi-at-2000-and-2007-highs



 It's only a chart and there's no cardboard sea to sail over here. It could turn out to be make believe, but at least you've been warned.

Overnight

As we wrote over the past weekend, two central banks meet this week, the Fed and the Bank of Japan. This seemed to make Asian investors somewhat nervous overnight as the Fed's two day meeting opens Tuesday. Though no change in interest rates are expected, investors will be parsing Chair Janet Yellen's words for clues.

Meanwhile, Reuters reported, the Nikkei share average dropped on Tuesday morning to a 1-1/2-week low as Wall Street languished and the dollar fell against the yen ahead of the U.S. Federal Reserve's two-day policy meeting, hurting exporter shares.

The Nikkei fell 1.3 percent to 16,400.47 in mid-morning trade, after falling to as low as 16,344.34, the lowest level since July 14. Exporters were sold after the dollar slipped 0.9 percent against the yen to 104.87, with Toyota Motor Corp shedding 1.5 percent and Honda Motor Co sliding 1.7 percent.Traders said that uncertainty over the Bank Of Japan's policy decision at its two-day meeting starting Thursday is making investors risk averse.

By mid-day the Nikkei was down 1.6% while the yen was up strongly. hitting of 104.77 at one point. In Hong Kong the Hang Seng Index rallied 0.9%, the Australian ASX 200 fell 0.2%,, the Kospi traded up 0/4% as second quarter GDP grew faster than expected, 3.2% on the year, versus 2.8% for the previous quarter.The Shanghai composite Index was up 0.5%. In other markets oil prices were up with Brent crude trading up 0.4% and gold down 0.3%.

Wednesday and Friday are the two big days with investors starting to doubt any massive changes in monetary policy since last week both the Bank of England and the ECB held steady. This coupled with what one trader observed:  "[Japanese] fiscal stimulus looks less bold, and we aren’t sure if [Bank of Japan Gov. Haruhiko] Kuroda will ease further." The Japanese plan calls for spreading any stimulus over several years which would lessen the initial impact on markets, according to one source.

Integrity

Why we like gold.

Most of MSM and the entrenched hate it. Or at least that's what they claim.

One of the largest Dutch banks, ABN Amro, has now warned its business clients a negative interest rate on the business accounts is in the works. The bank is currently updating its terms and conditions and will more specifically include its right to reduce the interest rates below zero as the bank wants to ‘protect itself’ against the continuously changing market circumstances.

Remember Debbie Wasserman Schultz, the Florida Democrat Congresswoman, DNC chair and those
WikiLeaked emails.

Integrity.

She incidentally is up for re-election in Florida this fall. We wonder how the rabble feel about that.

On top of that, people might have forgotten (but we haven’t) that ABN AMRO was –as far as we know- the first bank which defaulted on its obligation to deliver physical gold to some of its clients. Even those clients had the right to redeem a certain investment in physical gold, ABN didn’t honor this commitment and offered those clients a payout in cash rather than delivering the metal which it originally promised to do.

So we have a bank controlled by a government that wanted to repatriate its gold, which is now proposing to reduce the interest rate below zero? We don’t believe in coincidences.

Integrity.

 

Here's a link.zerohedge.com/news/2016-07-24/it-begins-dutch-bank-abn-amro-will-charge-negative-interest-deposits

As another poster recently put it: If you can't touch it, you don't own it.

Educated Points Of View

They say people who can make a living doing what they love are blessed. If you get paid to pen this drivel,"The Perils of Populism," that's a good gig, man. If I were you I'd hold onto it.

I was wondering as I read when you'd roll out one of your profession's favorite terms, visceral. In your vernacular that means: bereft of reason; ill-rational, lack of common sense. When are you people ever going to stop hiding behind semantic covers, get enough testosterone to stand up straight, high water blue jeans or no, and tell the rabble what you really think of them: a hoard of knaves and dolts who spent most of their lives reading public bathroom graffiti instead Ricardo or Samuelson. If your contempt and arrogance were any thicker, sir, one would need a chainsaw to cut it.

But you don't disappoint with this next gem. "Against such emotion it's very difficult," you say, "to introduce studied reflection to the discussion."  One can only marvel at how long it probably took you to come up with that beauty. Concrete?  Abstract? It's a real cutie. And quite obviously it's in the province of only the chosen few.

There are other schools than the ones you note. Two that we know of both begin with the letter S: Streets and Survival, ones we have a nudging feeling you wouldn't excel at. Those are the streets where most of the rabble you and your elitist brethren are so contemptuous of spend most of their existence trying to survive.

It's generous that you grant them your permission. "It's certainly proper and desirable for citizens to question the existing order. And there are certainly policies to aid economic growth and allocate it proceeds equitably," you write. You've nicely set up your straw man here, sir. You're are so subtle. "But we will try to look at things dispassionately." One assumes that "dispassionately," like "studied reflection," is another genetic gift limited to those chosen few. It isn't nerdiness that's a disadvantage to your profession, sir. It's the pseudo-science itself and its pitiful track record. Life teaches many things. One of them is all talk in all breakups ends at some point.

Peddlers come in all sizes, shapes and occupations. Economics is no exception. A better, more accurate title for your piece would've been "Peddling the Perils of Populism." This is just an observation and intended as nothing more. But in case you've yet to notice, the gauntlet in the sand is down. And it's a global gauntlet. Thank whatever powers might be you and your kind are on the other side because it is fruitless to try to introduce studied reflection to the discussion.

advisorperspectives.com/commentaries/20160723-northern-trust-the-perils-of-populism

We publish the link to this article by Carl Tannenbaum of Northern Trust so you can read it for yourself and decided who is out of touch with whom. Northern Trust of Chicago is a firm noted for catering to its wealthy clients, no crime in that, just a fact. But to borrow one of economists' favorite ploys and hedge a bit, there might be some snootiness there.

Speaking of hedges, note Mr.Tannenbaum's last sentence in the article's second paragraph: "But the population's complete detachment from educated points of view could be an unfortunate overcorrection."

Few things in life are given, but here is one: Any time one differs with the educated entrenched, one is completely detached.